German builders ponder on how to compete with China in Africa

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German builders ponder on how to compete with China in Africa
Photo:Economist

German builders are yet to find a working strategy in Africa as China dominates the construction scene on the continent, an official from the Federation of German Contractors (HDB) has acknowledged.

Hans Joachim Bliss told Deutsche Welle that many German contractors have lost bids in Africa because Chinese contractors offer lower prices undercutting their competitors by 20% or more.

“Chinese companies benefit  from subsidies from Beijing and preferential treatment in many African countries, where they are often exempt from some visa regulations and taxes,” observed European International Contractors(EIC).

EIC notes,”Germany doesn’t have double taxation agreements with most countries in Africa, including its two most populous countries, Nigeria and Ethiopia.”

Also giving Chinese contractors an upperhand is World Bank funding. Governments tend to choose Chinese contractors because they are cheaper. And that’s a global trend.

“Chinese firms captured as much as 21% of all World Bank transportation infrastructure project value in 2018, up from 12% in 2014,” says a report from Rhodium Group.

Africa Construction Trends Report (2019) released by Consultancy firm Deloitte seemed to agree with the notion that Chinese contractors are a dominant figure in Africa construction industry.

In West Africa for instance, China accounts for 30.7% of projects under construction.

“Chinese contractors are heavily concentrated in the Transport sector.West Africa’s 10 largest projects account for 72.8% of the region’s total project value, with six of the 10 projects falling into the Transport and Shipping & Ports sectors,” the report says.

The trend is similar in East Africa where  China is responsible for building 40% of the projects.

“We need to work more intensively together,” said Joachim Bliss. “One company can’t compete with a state-owned company from China.”

Chinese companies are building the vast majority of roads, ports, airports and other transportation infrastructure across Africa. In 2018, they accounted for 62% of the market share on the continent, according to figures from EIC.

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